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Investors with medium-term perspective can consider buying the stock of construction company IVRCL (Rs 75.5). Following a broad sideways consolidation in the range between Rs 150 and Rs 200, from June 2009 till November 2010, the stock broke out downwards. This down-move accelerated steeply during January 2011 and found support at its long-term support zone between Rs 60 and Rs 65 in early February. In late May, the stock's long-term base zone again provided support to the stock and halted further decline. The stock subsequently changed direction, triggered by positive divergence in daily price rate of change indicator. It surged almost 9 per cent last week forming a bullish engulfing pattern in weekly chart signalling trend reversal. During this rally, the stock has breached its 21-day moving average and signalled initial signs of bullishness. There has been an increase in volumes over the past four trading sessions. The 14-day relative strength index which determines the speed and alteration of price movements is rising in the neutral region towards the bullish zone and weekly RSI has recovered from its oversold levels and is on the brink of entering the neutral region. Daily moving average convergence divergence indicator has signalled a buy and is moving higher in line with the stock price. Besides, the daily price ROC is featuring in the positive territory and weekly indicator has entered this territory denoting buying interest. Considering the aforementioned bullish signals and the stock reversing higher from its long-term support zone, we take a contrarian stance on it from a medium-term perspective.
We believe that IVRCL has the potential of trending higher in the medium-term and reaching our target of Rs 90. However, we don't rule out a minor pause around Rs 84 while trending higher. Investors with medium-term horizon can consider buying the stock with stop-loss at Rs 67.
Follow up – Advanta India (Rs 238.5)
The stock moved sideways and finished the week flat. We adhere to our medium-term bullish forecast on the stock with the price target and stop-loss mentioned last week.
(This recommendation is based on technical analysis. There is a risk of loss in trading.)
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